Bank on it: First Colebrook takes $4.5m through TARP Program.

First Colebrook Bank has decided to take $4.5 million of Troubled Assets Relief Program money to boost lending to small businesses on the Seacoast and in central New Hampshire, the bank announced Tuesday.

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"We have a strong pipeline of loan activity," Jim Tibbetts, president and chief executive of the bank, told NHBR. "Our capital is tied up in our branches, and we wanted to expand our acquisition of capital so we can continue with our growth plans."

First Colebrook is the sixth New Hampshire bank to take advantage of the TARP's Capital Purchase Program. Together, the New Hampshire S banks are drawing downs lightly more than $40 million from the first $250 billion of the Trouble Asset Relief Program, passed by Congress before president Obama took office.

The CPP program is designed for stable banks, as opposed to the highly publicized TARP infusions into larger troubled financial institutions, like Bank of America, Citigroup and AIG, and has very few strings attached. Bank executives can't receive more than $500,000 in non-equity compensation,--"unfortunately, that won't be an issue with me," Tibbetts said.

By accepting the loan, First Colebrook agreed to grant $4.5 million in preferred stock, with an agreed-upon return of 5 percent over five years, as well as 250,000 shares in warrants with an expected return of 9 percent. That works out to a 6 percent return, but Tibbetts explained that the extra capital could be used to leverage loans, so the real cost of money would actually be less than that.

Current regulations require a bank to have $1 million in capital for every $10 million it lends, which means $4.5 million could actually leverage $45 million in loans.